Greece gets tough on tax; appoints terror judge

Greek Finance Minister George Papaconstantinou, center, speaks next to Justice Minister Haris Kastanidis, right, and Michalis Chrisohoidis, Minister of Regional Development and Competitiveness, left, during a news conference in Athens Monday May 2, 2011. Greece's cash-strapped government promised Monday to raise an additional euro11.8 billion through 2013, with a crackdown on tax evasion.

Petros Giannakouris, Associated Press

Summary

With the help of a prominent former terrorism prosecutor, Greece's cash-strapped government promised Monday to raise an additional €11.8 billion ($17.5 billion) through 2013 via a crackdown on tax evasion, and indicated it could seek a second extension of its bailout loan repayment.

ATHENS, Greece — With the help of a prominent former terrorism prosecutor, Greece's cash-strapped government promised Monday to raise an additional €11.8 billion ($17.5 billion) through 2013 via a crackdown on tax evasion, and indicated it could seek a second extension of its bailout loan repayment.

Finance Minister George Papaconstantinou announced the tax crackdown a year after his country was granted an international bailout loan package worth €110 billion ($164 billion) from the European Union and International Monetary Fund to rescue it from the brink of default.

He also suggested Athens would welcome a second extension in the repayment schedule for the loan.

"I expressed the hope that we could have an even better arrangement regarding the repayment of the €110 billion," Papaconstantinou said of comments he made in an interview to French newspaper Liberation.

In the interview published Monday, the minister said Athens favored that the repayment timetable "be pushed back again and that the interest rate be lowered even more.....That way, we could deal with our other deadlines."

Greece has already had the repayment time for the bailout loans extended from three to 7½ years and the average interest rate cut by one percentage point to around 4 percent, but with the economy still contracting, the debt burden remains so hefty many observers think the country would be better off looking at ways of how it can cut the overall amount it actually owes.

In the meantime, Greece is trying to raise as much money as it can and its new measures were announced in the week that EU and IMF debt inspectors are due in Athens. They have warned that Greece needs to improve its tax system to end a weak run in state revenues that is threatening the country's fiscal rescue program.

Speaking in a news conference in Athens, Papaconstantinou said Greece was in talks with Swiss authorities to monitor Greek deposits. The deal, he said, would resemble a recent agreement between Britain and Switzerland that allows Britons with Swiss bank accounts to send taxes home while maintaining their privacy.

Other measures include creating a speedboat division of fraud inspectors, and appointing a former senior prosecutor who handled terrorism cases to assist with the tax collection effort. Retired prosecutor Yiannis Diotis headed the case against Greece's deadly far-left terror group November 17, that led to the conviction of 15 suspected members in 2003.

"Tax evasion is a crime against the country," Papaconstantinou said, noting that the measures include tougher penalties for bribing tax officials, a radical reorganization of the tax-office structure, and increased use of online tax services.

"This is the first time ever that such a systematic effort has been undertaken," the minister said.

The country's black economy is worth about one-third of the country's gross domestic product according to estimates by the Greek financial research groups, the EU and the Organisation for Economic Co-operation and Development.

With the country's debt running at 142.8 percent of GDP last year, or €328 billion ($487 billion), many analysts and politicians in Europe have said Greece will inevitably have to restructure its debt at some point — a restructuring could involve cutting the total amount of money Greece owes or giving it a lot more time to repay.

But the government — and the European Union — are adamant that is not on the cards.

Debt restructuring for Greece "is not part of our strategy and will not be," the EU's top economic affairs official Olli Rehn said in Brussels Monday.

Rehn said proponents of restructuring appear to be unaware of the risks to overall financial stability such a move would entail.

European officials have warned that a restructuring of Greece's debt could lead to panic on financial markets similar to the turbulence following the collapse of Lehman Brothers in 2008, dragging down banks and other struggling eurozone countries.

Papaconstantinou reiterated one more time that the country was not seeking a restructure.

"We have said repeatedly, and we continue to say: There will be no restructuring of the Greek debt," he said.